Ousted Wachovia CEO has a big interest in a turnaround

Ken Thompson has millions of reasons to hope the next CEO of Wachovia Corp. can revitalize the bank and its beaten-down stock.

Although Wachovia’s board forced him into early retirement today, the 57-year-old ex-CEO leaves with 5.97 million vested stock options, according to a company filing with the Securities and Exchange Commission.

Unfortunately for Thompson, all of the options are under water: The per-share exercise prices are between $27.56 and $58.36. Shares of Wachovia, the fourth-largest U.S. bank, closed today at $23.40.

But most of the options expire after 2010. Thompson got 1.49 million options in February alone, and they don’t expire until 2018. There is nothing in the filing indicating that earlier expirations will be imposed. So Thompson may yet come out ahead -- depending on how quickly the bank’s fortunes revive, or if a suitor emerges to buy the company at a decent premium.

Thompson won’t be short of cash in the meantime: Wachovia is paying him a retirement benefit of $1.45 million and will cover the costs of an office and an assistant for the next three years. He also will be immediately vested in restricted stock worth $7.1 million.

And he’ll be reimbursed up to $50,000 for legal fees and related expenses incurred "in connection with the preparation and negotiation" of his termination agreement.

Which reminds me to ask: Do CEOs ever pay for anything out of their own pocket?

Comments

[slocro]

A man runs a company into the ground and they treat him like a king. I can see why this country is going to the birds.

[Michael Snyder]

This is a prime example of Reganomics in action. Twenty five years ago this clown would have been fired for incompetence and twenty five years before that it would be tar & feathers time. Now he gets a "retirement package" that looks like a lottery ticket with a "double your prize" scratch off.
Goody for him! Now what about the thousands of Americans who have their retirements tied up in Wachovia stock? Most of these people don't realize an annual income equal to the legal fees they had to pay to get this monkey off their backs. The value of their already meager retirements have been cut in half by Thompson's bad decisions and now they're on the hook for how many million?
I'm betting I'm not the only person fed up with seeing incompetent CEOs and CFOs getting multimillion dollar bonuses for running corporations into the ground. Mozillo, O'Neill, Nadrelli, the list is endless. These bozos need their own clubhouse, but not in Boca Raton. I'm thinkin' razor wire & gun towers around the yard where they can gather in their orange jump suits & play checkers.

[Dee]

Seems very similar to California divorce laws where the working husband has to pay spousal support to the non-working wife because she is accustomed to a particular lifestyle. Great point from the previous comment that these guys get a golden parrachutte while the stock holders (and the tax payers who will be making up the difference somehow) are left holding the bag. Wish I had a job where I could fail miserably and still get an outrageous settlement AND the bonus of early retirement...

[The New York Crank]

The recent mea-only-semi-culpa on the Wachovia website makes me suspicious. The website speaks simple English until you get to the matter of their stock's performance. Suddenly, we're all knee deep in a swamp of jargon-filled obfuscation, neatly crafted into sentences so lengthy, they boggle the mind and challenge the eye.

An example:

"The update in the credit reserve modeling in response to the current and forecasted market environment and its effect on consumer behavior, particularly in stressed markets, resulting in a significant increase in the first quarter 2008 provision for credit losses. In addition, the scope of credit disclosures was increased to provide enhanced insight into the payment option consumer real estate portfolio."

All this follows the ancient principle: When in deep trouble, disappear into a fog of verbiage.

Crankily yours,
The New York Crank

[Patricia Roach]

As one of your bloggers stated in June, Ken Thompson should be tarred and feathered. He has taken a bank. whose shares were selling at $50+ and reduced it to $.83. Today this bank has been sold to Citigroup. I assume the investors will receive less than one dollar a share, while Thompson will still be able to live in the lap of luxury. Where is the justice in this?